Multifamily Permitting, Starts Bounce Back

A temporary multifamily construction slowdown reversed course in January–the annual rate for both permits and starts increased significantly from December, reported Axiometrics, Richardson, Texas.

The U.S. Census Bureau said multifamily units authorized for construction jumped more than 25 percent in January; multifamily units started increased nearly 20 percent.

But year-over-year figures showed less volatility, Axiometrics said. January’s 479,000-permit annual pace represented a 3 percent increase from January 2017’s annual rate. January’s construction pace would equal just over 430,000 multifamily units started for the year, 3.1 percent more than January 2017’s annual rate. The annual multifamily start rate now exceeds 400,000 units for the first time since January 2017.

January’s top metros for multifamily permitting included New York, Dallas, Los Angeles, Seattle and Denver, Axiometrics said.

Though the top 10 permitting metros all saw more permitting than a year ago, there are signs of slowing compared to two years ago, Axiometrics said. New York, Dallas, Los Angeles and Austin, Texas all saw decreases in annual multifamily permitting compared to January 2016; New York saw permitting drop more than 50 percent compared to January 2016, when the city’s 421-a tax exemption program expired.

Yardi Matrix, Santa Barbara, said multifamily development will likely reach a cycle peak this year. The firm said it expects 360,000 new units will deliver in 2018, 20 percent more than last year.

“With demand for apartments robust, developers have moved into high gear in recent years,” Yardi Matrix’s Multifamily Outlook report said.

Yardi Matrix noted a construction worker shortage has slowed apartment deliveries somewhat. The average start-to-finish time for projects reached 22 months in late 2017 compared to 16.5 months a year before.

“The growth in supply remains healthy, but some developers and lenders are starting to exercise caution in the face of rising vacancy rates, a slowdown in rent growth and regulations aimed at putting the brakes on construction lending,” Yardi Matrix said. The report predicted 2019 will mark the start of a more “moderate” rate of completion.